The central bank increased its main interest rate to 24 percent from 17.75 percent, citing concerns over price stability and saying it would maintain a tight stance on monetary policy until the inflation outlook improves significantly.

The monetary-policy decision eased investor concerns over the central bank’s independence from Erdogan, whose call for lower rates earlier Thursday had weighed heavily on the lira.

“This was much bigger than expected. It sends a signal to the market and it’s a good signal,” said Kevin Daly, portfolio manager for emerging-market debt at Aberdeen Standard Investments. “It gives you some confidence in the lira that you might be able to buy this thing again.”

The turmoil in Turkey has rattled global markets in recent weeks and comes at a precarious time for developing economies around the world. From South Africa to Argentina, currencies have been hit by a combination of domestic troubles, the soaring dollar and increasing global trade frictions.

In Turkey, the government and central bank face a looming conundrum, analysts say.

On the one hand, additional interest-rate increases may be necessary to combat inflation, which is expected to accelerate given that the lira has shed around 40 percent of its value against the dollar this year. Turkey’s inflation shot up to 18 percent in August, as the weaker lira pushed up a raft of prices, in particular energy, most of which Turkey imports.

On the other hand, much higher rates could choke the Turkish economy, which grew 5.2 percent in the second quarter, but is expected to slow down and possibly contract in the second half of the year.

Gains in the currency, which shot up 5 percent against the dollar after the central bank’s announcement, later moderated to around 2.8 percent.

“Today’s move is a decisive step in the right direction. But we need to see if they keep this tightening until inflation starts to cool,” said Diana Amoa, emerging-markets portfolio manager at JPMorgan Asset Management. “For Turkey, it’s still a fight for its lost credibility.”

Before the rate decision, Erdogan announced moves aimed at supporting both the lira and the country’s overleveraged real-estate sector by restricting foreign-currency transactions.

He banned transactions denominated in foreign currencies, as well as those in lira pegged to different currencies, an edict that aims to support Turkish real-estate developers who have taken billions in foreign-currency debt in recent years. Past transactions in foreign currencies must be converted to lira within 30 days at rates to be agreed between parties, the ruling said.

Under Erdogan’s watch, Turkish corporations have gorged on foreign-currency loans. Much of that borrowing was plowed into construction of scores of high rises, resorts and shopping malls, where developers often set rents in euros or dollars.

“Those who don’t deal with import or export shouldn’t cross paths with foreign currencies,” Erdogan said in a televised speech from Ankara. “Business in our country must be made in our currency.”

Before Thursday’s ruling, analysts feared many lessees, who earn money in local currency, wouldn’t be able to meet ballooning rental costs. In turn, many developers won’t be able to pay down foreign-currency debt, they predicted.

Now, untangling those transactions could be a painful exercise.

“The question is who is going to bear the brunt,” said Robin Brooks, chief economist at the Institute of International Finance. “One way or another, somebody loses.”

Ümit Kiler, a board member of Kiler Holding, which built and manages the Sapphire residential tower and shopping mall in Istanbul, urged the government to impose a rate to convert foreign-currency contracts into lira, and provide guidelines for negotiations between developers and creditors.

“I think there should be government regulation,” Kiler said. “Because this is something that cannot be fixed through bargaining.”

Analysts questioned whether Erdogan’s big infrastructure projects, such as Istanbul’s new airport – billed as the world’s biggest – would be affected by the new regulation on foreign currency. Most of those projects are being developed by Turkish companies, which took on large dollar and euro loans after receiving financial guarantees from the government.

Officials at the finance ministry, which will be responsible for granting exemptions, didn’t return calls.

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